MEK Iran: Stagflation Threatens Iranian Economy
The National Council of Resistance of Iran (NCRI), and the People’s Mujahedin of Iran (PMOI / MEK Iran), reported that the Iranian regime entered the Persian New Year facing the same twin economic and social crises that have dogged it for four decades. The regime’s repressive rule of its citizens, coupled with its single-minded focus on oil production has created an unstable economy full of angry and impoverished people.
Regime leaders are unwilling to dial back the repressive laws
Regime leaders are unwilling to dial back the repressive laws governing the country out of fear that any freedom will lead the people to rise up and overthrow the government. Failing that, the only possible way to address any part of the social unrest in Iran would be to repair the economy.
Some of the more moderate members of the regime have suggested that this could be achieved by reviving the 2015 Joint Comprehensive Plan of Action (JCPOA), more commonly known as the Iran nuclear deal.
Talks are ongoing in Vienna to determine if there is a path to bring Iran back into compliance with the terms of the deal and lift some U.S. sanctions. However, Iran’s economic woes predate oil sanctions by decades, so it is unlikely that a return to the JCPOA would fix the systemic issues that plague the country’s financial system. In addition, Iran will elect a new President this June, and the winner will almost certainly be a hardliner who is hostile to the JCPOA. If the deal is not signed before June, it has little chance of succeeding.
A single-minded focus
Iran’s economy for the last century has focused almost exclusively on the oil industry, to the exclusion of other industries, technologies, infrastructure, and education. Young Iranians have had to leave the country for educational and career opportunities because no opportunities exist at home. Even when oil money poured into the country, it was concentrated into the hands of the elite. A wealthy few lived in luxury while the vast majority of Iranians lived (and still live) in poverty.
The renewal of sanctions has revealed the consequences of the government’s failure to diversify the economy. Inflation and a stagnant economy have combined to create an economic condition known as stagflation. The situation is dire and nearly impossible to fix. The government can control inflation, but that creates a recession. It can print money to stimulate the economy, but that worsens inflation. Regime officials worry that Iran is on course to suffer the same economic fate as Venezuela.
The state-run Arman daily described the severity of Iran’s economic quagmire in an April 17 article: “Iran’s economy is in a difficult situation. Recession and inflation are the most important economic problems that Iran is facing in 2021, and if it (the regime) does not have a plan for it, this situation will be transferred to the following years, in which economic development plans will no longer make sense.”
A rare and serious condition
Regime economist Mehdi Karbasian explained the rarity of Iran’s economic condition in an April 17 article of the state-run Mashregh: “Iran’s economy has been suffering from stagflation for years and this procedure is one of the rare economic diseases in the world. That is, countries are either in recession or inflation and stagflation is very rare. But unfortunately, over the past decades, we have also had serious stagflation at times.”
In another April 17 article in Jahan-e-Sanat, Karbasian said that long-term stagflation in Iran has had dire effects. Inflation rates exceeding 40 percent have affected 70 percent of society, and the recession has caused a negative GDP for several years. The economic situation then worsens the social unrest.
“There has been a fundamental change in the context of Iranian society that can no longer be denied. This event is the turning point of society in the satisfaction curve and the flow of satisfaction,” Karbasian said.
“The twelfth government no longer has the money to give to the higher institutions and the regulatory bodies, and they fall from the satisfied rank to the line of the dissatisfied. It no longer has the money to give to the workers, so the workers are also dissatisfied.
“Iran’s education and health personnel are dissatisfied because of the government’s inability to increase wages and salaries due to a lack of welfare funding.
“There is no money left to pay farmers to buy wheat. Journalists, footballers, writers, intellectuals, as well as government employees, and more importantly, actors and key players in politics and economics, are also dissatisfied,” he added.
The Iranian regime has destroyed the economy through corruption and incompetence, and it is incapable of fixing the mess it has made. The MEK and the people of Iran have made it clear that real change will only come when the ruling government is overthrown.